I'm a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I've also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

World Happiness Report: Even Jeff Sachs and Richard Layard Don't Really Believe It

The World Happiness Report has just been released and when we actually read through it, rather than just the press releases, we find that the main authors, Jeff Sachs and Richard Layard, don’t really believe the basic thesis themselves.

That basic thesis is that economic growth doesn’t really improve happiness, we really ought to be worrying about human happiness and thus we should concentrate on things other than economic growth. The problem with this is that their own report shows that the absence of economic growth most definitely makes people unhappy: therefore we should indeed strive for economic growth in order to make people happy.

It is, of course, possible to be trite about such reports and since I enjoy being so I shall. We can see that the US comes 11 th in the listing of happy countries. All of the countries above the US have a lower corporate income tax rate than the US. Thus the secret to happiness is to have a lower corporate income tax rate. That is trite though, for all OECD countries now have a lower than the US corporate income tax rate so perhaps that’s not really the reason.

As basic background we have the Easterlin Paradox. Yes, higher incomes make people happier but richer countries don’t seem to be happier in aggregate as a result of such higher incomes. So, therefore economic growth isn’t the secret to the desired increasing of happiness.

However, there’s a serious problem with this observation: when we go and look at what it actually is that makes people happier we find that what does make people happier are the things that lead to that economic growth which we think doesn’t make them happier. Take this (page 66) for example:

Unemployment When people become unemployed they experience sharp falls in well-being and their well-being remains at this lower level until they are re-employed.33 The estimated effect is typically as large as the effect of bereavement or separation, and the unemployed share with these other experiences the characteristic of ceasing to be needed. The Appendix to this chapter documents that unemployment reduces well-being in all the datasets analyzed. It also shows that the main impact of unemployment on well-being is not through the loss of income, but rather through loss of social status, self-esteem, workplace social life, and other factors that matter.

So in order to increase happiness we want to get as close to full employment as we can. However, there’s a little acknowledged point about such full employment. In order to maintain it we must have economic growth. This is because technology.

“Because technology” sounds trite but I’m afraid it isn’t. By technology here we do not mean just shiny electronic gewgaws: we mean all of the new knowledge that pours into the world each year about how we can do things better. From exciting new methods of turnip weeding through how we might lay out a bricklayers’ workspace to reduce effort and increase output to robots making cars and the distressing manner in which smartphones have entirely destroyed the telegraph business.

A general observation is that this onward march of technology increases labour productivity by some 1-2% a year. We don’t really have a hugely accurate estimate of it, unfortunately, as we calculate it in general by summing up everything else we can think of and calling the last bit we cannot explain, the residual, improved productivity. But we do know that it is there: Bob Solow once calculated that this technological progress (which is more than just improved labour productivity to be sure) accounted for 80% of the western world’s growth in the 20th century.

This is where our unemployment problem comes in. As we curious shaved apes play around with stuff and work out new methods of doing things we reduce the amount of labour necessary to provide any given level of production. However, we’re also saying that unemployment leads to great unhappiness. So what are we to do with this newly surplus labour? If we keep production levels static then we’re going to end up with 1-2% of the available labour being entirely redundant each year. After 50 years we’ve (without compounding) some 50% of the available workforce entirely without jobs and yes, I think we would all agree that that would lead to a deeply unhappy society. Certainly my old Professor, Richard Layard, who wrote this chapter would think so for he says that unemployment is a source of deep unhappiness. To the point that almost any job is better than no job.

But wait! What happens if we employ this newly surplus labour to do something so that it is happier? Well, then we’ve got our previously static output plus the output from this not anymore redundant and newly employed labour. And what is it that we call increased output? Yes, that’s correct, we call it economic growth.

Which brings us to the failure of the idea that economic growth doesn’t improve happiness. For as even the authors of this report insist, the things that make people happier are the things that lead to economic growth.

Among the more “external” factors, key determinants of happiness include: • income • work • community and governance, and • values and religion and, among the more “personal” features, key determinants include: • mental health • physical health • family experience • education, and • gender and age

You can trawl through the economics papers yourselves to measure the truth of this next statement: near all of those determinants of happiness are positively correlated with economic growth. There are reams of papers showing that the physical and mental health of a population are important for economic growth, the better both are the more growth there will be. I’m sure I’ve seen Jeff Sachs argue that illnesses like malaria are reasons why some places don’t grow. Education is urged as the solution to the advanced countries’ currently sluggish growth, we certainly talk about the way in which demography (that’s the age and gender bit) influences growth. Community and governance: vast swathes of the literature are about how institutions, the presence or absence of corruption (even the type of it) influence growth.

All of which is something that I’m afraid I find vastly amusing. We have here this insistence that economic growth does not make us happier. Yet when we examine the things that do make us happier we find that they’re pretty much the list of things which encourage economic growth. In one instance at least, unemployment, we find that we must absolutely have economic growth in order to eliminate this source of unhappiness.

All of which leaves the basic thesis really rather threadbare. We might say that economic growth is the outcome of our being made happy. We might also say that it is the process of economic growth itself that makes us happy, not the level of wealth that we enjoy as a result. But the thesis that we shouldn’t have economic growth but should instead concentrate on what makes us happy seems to be refuted by this very report which makes that very claim. For near everything they tell us about what makes us happy is positively correlated with that economic growth they wish to dismiss as being correlated with happiness.

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I think you can add levels of ‘Trust’ to the list of things the authors find is conducive to happiness but also is known to be conducive to economic activity too. If, in the long run, economic growth’s all about micro economics, as you’ve maintained before, isn’t the more interesting task a reconciliation of micro-economics with micro-happiness? Because it seems to me that the choices made at an individual level in a market incorporate happiness maximising policy, in a way that a survey does not.

“But the thesis that we shouldn’t have economic growth but should instead concentrate on what makes us happy…”

The problem is, Tim, that that is not what the authors are saying. You are simply indulging in the fine old tradition of cherry picking your way along the path of your ideological bias and ignoring alternative bounty as you keep your eyes narrowly focused and your mind firmly closed.

Here are just a couple of quick clues as to actual thesis of the report: “pursuing growth to the point of environmental ruin” and “sustainable development.” Economic growth, per se, is not excluded. In fact, many argue sustainable development is the path to a permanent and healthier prosperity. But that’s another discussion.

Another clue would be : “The sages taught humanity, time and again, that material gain alone will not fulfill our deepest needs. Material life must be harnessed to meet these human needs, most importantly to promote the end of suffering, social justice, and the attainment of happiness.”

Can’t argue with a survey on happiness. Can’t argue with saying happiness is valuable. The problem is the authors whilst pointing out a paradox, haven’t got themselves out of it just by saying some things are more important than money, Does it not follow that if you want to “harness material life” to end suffering, then the more material life you have the more suffering you can end?

Like Popper, I prefer the emphasis to be on alleviating suffering rather than enhancing the happiness of already happy people.

I think the answer to your question, like so many of life’s queries, is, it depends.

It depends on the distribution of the marginal utility and we all know that in the western world, the rich world, that distribution is increasingly skewed towards the already very, very, very, very happy.

Not going to disagree with Popper, not without a poker handy anyway. You are free , i presume, to spend your income and savings on whatever makes you happy. Spending decisions are one thing, you spend what you have got and we all have our preferrences on how to do that. The economic growth thing: that though is not an either or question. The more of it really is the better, unevenly distributed and all. You may say that some don’t need any more wealth/happiness, but that doesn’t get us very far. That’s because marginally everyone benefits from economic growth and trying to restrict it to only those below a certain level is sure fire way of achieving no growth at all. And so we come back to, make more, make as much as we can and the more the merrier.

I can only assume this is deliberately shallow reading of the report and the theories behind it. Two points you make are directly in conflict:

1. You state economic growth brings happiness; people are more productive, can get more of what they want, etc.. 2. You state economic growth, beyond a certain point, makes no difference to happiness. This is the Easterlin Paradox

So, unless you are going to deny the date supporting the Easterlin Paradox, you have to give up on 1.

Further, you appear to have mixed up, rather casually, correlation and causation. You state that many of the things that cause happiness lead to economic growth. The data supports this. You then claim that, therefore, economic growth leads to happiness. This is incorrect – it gets the direction of causation wrong. Take an example: someone suffering from malaria is not able to work and create growth. However it doesn’t follow that economic growth removes his malaria. Moreover, this causation/correlation confusion faces the same problem as I stated above: are you denying the Easterlin Paradox or not? If you are, why? If you aren’t then your views contradict.

No, I’ve not stated that the Easterlin Paradox is true. Rather, I’ve stated what the Easterlin Paradox is. Then disagreed with it. As the paper itself does in fact disagree with it, pointing out that actually happiness increases as the log of rising incomes.

So that’s that one.

And I’m claiming something slightly more subtle than what you state about economic growth and happiness. My claim is that being in an economy which is growing is in itself conducive to increased happiness. Certainly we know that being in a shrinking economy reducecs happiness and I think we could take the world around us today as being evidence that being in a stagnant one does not increase happiness.

Indeed, my view (although not something I’d like to have to try and prove) goes further than even this. We’re not in fact, when we measure happiness across different coubntries at different levels of wealth, measuring what we think we are. We are not measuring the effect of wealth upon happiness. What we are measuring is the effect upon happiness of living in an economy that has been growing for a long time.

Sure, happiness is higher in richer countries: but then the richer countries have, by definition, been growing for longer. It’s that latter effect we’re catching, not the absolute level of wealth at all.

I finally got around to skimming the report, and it seems like the headlines chosen by you and Mr Sachs, et al. are mis-representing your agendas. At the least, your headlines do not reflect the report in the way most would assume.

It is true that the report makes the arguments you describe, and your article refutes them fairly convincingly using the report’s own data. However, you are not arguing about what impacts happiness, you are arguing about what impacts people’s evaluations of their quality of life.

That is a meaningful distinction, since I’m sure we both know plenty of unhappy people with high quality of life, and vice versa. It is also a useful distinction, since it seems to make your arguments stronger. As you point out, it is difficult to argue that quality of life is not largely dependent on economic growth, and as you declare, the report’s own data shows that is true. Just look at the list of top twelve “quality of life” countries: Denmark, Finland, Norway, Netherlands, Canada, Switzerland, Sweden, New Zealand, Australia, Ireland and the United States.

But isn’t a happy country as a country where people feel happy?

The report has two such country rankings, though it has fewer controversial things to say about them.

One is a list ranked by how people remember feeling yesterday – a VERY different list than the quality of life list. The twelve “happiest yesterday” countries are Ireland, Thailand, New Zealand, Canada, Iceland, US, Philippines, Austria, Panama, UK, Australia and Germany. While #2 quality of life Finland is lucky #13 on the happy list, #3 quality of life Norway is in the mid-60s between Mauritius and Djibouti, and #1 Denmark is in the bottom third of happy countries, right between Rwanda and Albania.

There’s another list, this one is of how happy people felt at the moment the survey was taken. Here it is: Iceland, Ireland, Costa Rica, Canada, New Zealand, Laos, Panama, Thailand, El Salvador, US, Paraquay and Argentina. Way to go Ireland, Canada, New Zealand and USA, you made all three top twelve lists! Also of interest, this particular list shows no statistical difference in the happiness of people in #16 Netherlands and #32 Trinidad, nor between #48 Finland and #64 Mali.

The report also explains why these lists are less prominent in the discussion. First, feelings of happiness do not vary as much by country as do evaluations of quality of life. Second, the variations in feelings of happiness do not correlate as strongly with political or economic situations. In other words, not as much to argue about at the UN or on Forbes, but certainly something worth considering.

For instance, it seems worth considering what is similar about Canada, Ireland, New Zealand, the United States, and maybe Australia. Having high quality of life _and_ happy people is a goal that is worth arguing about.

The author ignores the fact that economic growth is only associated with increased happiness when looking at democratic, developed countries, as compared to undeveloped or developing countries. Obviously, economic growth in an underdeveloped country will lead to a higher level of satisfaction of basic needs, and consequently in happiness/well-being. You can’t compare apples and oranges. But among just the wealthiest, most developed nations, there no connection between economic growth and increased happiness can be seen. Take, for example, the United States over the last 50 years. Per-capita GNP has increased 200-300%, yet well-being has not. I think the author is missing the point.